Question 1

International strategy involves taking products first produced for their domestic market and selling them internationally with only minimal local customization.

Accepted Answer

International strategy involves taking products first produced for their domestic market and selling them internationally with only minimal local customization.The distinguishing feature of many such firms following the international strategy is that they are selling a product that serves universal needs,but they do not face significant competitors,and thus unlike firms pursuing a global standardization strategy,they are not confronted with pressures to reduce their cost structure.

Question 2

A global standardization strategy makes most sense when there are strong pressures for cost reductions and demands for local responsiveness are minimal.

Accepted Answer

Firms pursuing a global standardization strategy prefer to market a standardized product worldwide so that they can reap the maximum benefits from economies of scale and learning effects.Their strategic goal is to pursue a low-cost strategy on a global scale.This strategy makes most sense when there are strong pressures for cost reductions and demands for local responsiveness are minimal.

Question 3

A localization strategy involves some duplication of functions and smaller production runs.

Accepted Answer

Because it involves some duplication of functions and smaller production runs,customization limits the ability of the firm to capture the cost reductions associated with mass-producing a standardized product for global consumption.

Question 4

The amount of value created by a firm is measured by:

Accepted Answer

The amount of value a firm creates is measured by estimating the difference between its costs of production and the value that consumers perceive in its products.

Question 5

A firm that bases each value creation activity it performs at that location where internal and environmental factors are most conducive to the performance of that activity is bound to realize location economies.

Accepted Answer

Locating a value creation activity in the optimal location for that activity can have one of two effects.It can lower the costs of value creation and help the firm to achieve a low-cost position,and/or it can enable a firm to differentiate its product offering from those of competitors.

Question 6

The text defines _____ as the rate of return that the firm makes on its invested capital (ROIC).

Accepted Answer

Profitability can be measured in a number of ways,but for consistency,we shall define it as the rate of return that the firm makes on its invested capital (ROIC),which is calculated by dividing the net profits of the firm by total invested capital.

Question 7

Pressures for cost reduction can be particularly intense in many industrial and consumer products like handheld calculators,semiconductor chips,personal computers,and liquid crystal display screens.

Accepted Answer

Pressures for cost reduction can be particularly intense in industries producing products that serve universal needs.This is the case for many industrial and consumer products;for example,handheld calculators,semiconductor chips,personal computers,and liquid crystal display screens.

Question 8

The ability to spread fixed costs over a large volume is one of the sources of economies of scale.

Accepted Answer

Economies of scale have a number of sources.One is the ability to spread fixed costs over a large volume.Fixed costs are the costs required to set up a production facility,develop a new product,and the like.

Question 9

The firm that moves up the experience curve most rapidly will have a cost advantage vis-à-vis its competitors.

Accepted Answer

Moving down the experience curve allows a firm to reduce its cost of creating value and increase its profitability.The firm that moves down the experience curve most rapidly will have a cost advantage vis-à-vis its competitors.

Question 10

Firms that pursue a transnational strategy focus on increasing profitability and profit growth by reaping the cost reductions that come from economies of scale,learning effects,and location economies.

Accepted Answer

Firms that pursue a global standardization strategy focus on increasing profitability and profit growth by reaping the cost reductions that come from economies of scale,learning effects,and location economies;that is,their strategic goal is to pursue a low-cost strategy on a global scale.

Question 11

A strategy of holding prices low in order to increase global market share and attain greater scale economies rather than raising prices to reflect the higher perceived value of the product could increase the firm's rate of profit growth even further.

Accepted Answer

Such a strategy could increase the firm's rate of profit growth even further,since consumers will be attracted by prices that are low relative to value.The strategy might also increase profitability if the scale economies that result from market share gains are substantial.

Question 12

Learning effects will be more significant in an assembly process involving 100 simple steps than in one of 1000 complex steps.

Accepted Answer

Learning effects tend to be more significant when a technologically complex task is repeated,because there is more that can be learned about the task.

Question 13

A firm's _____ can be defined as the actions that managers take to attain the goals of the firm.

Accepted Answer

A firm's strategy can be defined as the actions that managers take to attain the goals of the firm.For most firms,the preeminent goal is to maximize the value of the firm for its owners,its shareholders.

Question 14

The experience curve refers to systematic increase in production costs that have been observed to occur over the life of a product.

Accepted Answer

The experience curve refers to systematic reductions in production costs that have been observed to occur over the life of a product.A number of studies have observed that a product's production costs decline by some quantity about each time cumulative output doubles.

Question 15

The key to making a strategic alliance work is that the two firms must approach the alliance with radically different agendas.

Accepted Answer

A good partner in a strategic alliance shares the firm's vision for the purpose of the alliance.If two firms approach an alliance with radically different agendas,the chances are great that the relationship will not be harmonious,will not flourish,and will end in divorce.

Question 16

Pressures for local responsiveness imply that it is easier to leverage skills and products associated with a firm's core competencies wholesale from one nation to another.

Accepted Answer

Pressures for local responsiveness imply that it may not be possible to leverage skills and products associated with a firm's core competencies wholesale from one nation to another.Concessions often have to be made to local conditions.

Question 17

Strategic alliances also allow firms to share the fixed costs (and associated risks)of developing new products or processes.

Accepted Answer

Strategic alliances also allow firms to share the fixed costs (and associated risks)of developing new products or processes.This is one of the advantages of strategic alliances.

Question 18

According to researchers,firms facing both strong cost pressures and strong pressures for local responsiveness should pursue a global standardization strategy.

Accepted Answer

When the firm simultaneously faces both strong cost pressures and strong pressures for local responsiveness they should pursue a transnational strategy.Firms that pursue a transnational strategy are trying to simultaneously achieve low costs through location economies,economies of scale,and learning effects;differentiate their product offering across geographic markets to account for local differences;and foster a multidirectional flow of skills between different subsidiaries in the firm's global network of operations.

Question 19

Which of the following is NOT a strategy for a firm to achieve profitability?

Accepted Answer

Managers can increase the profitability of the firm by pursuing strategies that lower costs or by pursuing strategies that add value to the firm's products,which enables the firm to raise prices.Selling more products in existing markets,entering new markets,and expanding internationally can also help managers boost the firm's profitability and increase the rate of profit growth over time.

Question 20

Profit growth is measured by:

Accepted Answer

Profit growth is measured by the percentage increase in net profits over time.

Quiz 11: The Strategy of International Business